Why is IBRC demanding a premium to sell Paddy McKillen’s loans to the Barclay brothers?

“BB [Barclay Brothers] have now been told that the bank has chosen a path to work consensually with you rather than to deal with them, I understand they are not happy.” and “Please keep that confidential I cant have board positions like this leaking out” Two text messages reportedly sent by the chief executive of IBRC, Mike Aynsley to developer Paddy McKillen in January 2012

In London, the battle for control over the three Maybourne hotels in central London, continues to rage. Paddy McKillen gets his opportunity to present his appeal case in February 2013, this is the appeal against the August 2012 judgment in London’s High Court which dismissed Paddy’s application to have the Barclay brothers’ acquisition of control of loans owed by Derek Quinlan in the hotel group declared unlawful.

The legal ins-and-out get very complicated but at its root, the billionaire 77-year old Barclay twins are trying their damnedest to take control of the company which owns the three hotels, Claridge’s, the Connaught and the Berkeley. This is brutally simple – one set of rich folks is tenaciously pursuing the acquisition of prized assets.

Paddy, on the other hand, has had a significant 35%-odd share in the group for nearly a decade, has overseen some redevelopment of the hotels and wants to hold onto his stake or get what he thinks is an adequate price for his stake. Again, this is brutally simple – Paddy, also a wealthy man, wants to protect his wealth.

What complicates the whole business is that the hotel group was acquired with a whole series of bank loans and that there were a number of shareholders. The Barclays – no relation to Barclays Bank, they’re businessmen who own the Telegraph newspaper and Ritz Hotel in London – have been buying up stakes from shareholders, which is also simple.

But they have also been buying loans which are either secured on stakes in the business or on the business generally. They bought €800m of loans from NAMA in September 2011. They also acquired control over loans advanced to Derek Quinlan which were secured on Derek Quinlan’s shares in the hotel group though there is dispute over whether control over Derek’s loans is tantamount to control over the shares. It gets complicated!

But a new front has opened up. The Barclays are trying to buy the loans that IBRC gave to Paddy McKillen, loans which are secured on Paddy’s stake in the hotel group. But IBRC has been rebuking the Barclays’ approaches which were apparently first made in December 2011. And we learn in today’s Irish Times that Paddy has some €300m of “personal debt” loans from IBRC and the Barclays are still trying to buy it. It is unclear what % of shares in the hotel group owned by Paddy are subject to the €300m loans, it is intimated that the €300m of loans are secured on 13.3% of the shares, which would be a little over a third of Paddy’s present stake in the group.

It is also unclear what the Barclays are offering for the loans which have a face value of €300m but it is intimated that they are offering €150m or 50c in the euro, but there are strings and incentives which blur that number.

What is interesting is the statement in today’s Irish Times report “The €150 million for the Coroin security equals the amount accepted by the National Asset Management Agency when it sold a 13.3 per cent security on Coroin shares held by financier Derek Quinlan to Malaysian investors, JQ2, the Barclays have argued”

The implication is that the Barclays are offering the same price to IBRC for a stake in the hotel group as NAMA was offered and which NAMA accepted. So why would IBRC hold out for more?

The apparent answer is that in addition to the €300m of personal loans given by IBRC to Paddy McKillen, there is an additional €1.3bn of loans given to Paddy’s companies by IBRC and the concern seems to be that the prospects for getting the €1.3bn back from Paddy’s companies will be diminished if these personal loans are sold.

Which is curious, because we remember that in the case that Paddy took against NAMA in Dublin’s High Court back in 2010, we had the CEO of IBRC or Anglo as it was then known, Mike Aynsley producing a statement for Paddy which said that all his loans were performing and that Anglo objected to Paddy’s loans being transferred to NAMA.

But now, apparently, we have a position where IBRC is demanding more for Paddy’s personal loans than NAMA deemed reasonable in the case of Derek Quinlan’s loans. And we seemingly have IBRC changing its position on Paddy’s loans compared with its position at the High Court in 2010 – it would surely have cast the High Court case in a different light if Anglo were to have suggested that certain loans mightn’t be recovered if the Maybourne loans were sold. We also have the perception of an inappropriate chumminess between IBRC’s Mike Aynsley and Paddy McKillen which was alluded to in the context of the text messages shown at the top of this blogpost, which were aired in open court in London earlier this year, though Mike Aynsley recently defended those texts at an Oireachtas committee hearing by saying

“There was nothing untoward in any way about the approach to Mr. Paddy McKillen to advise him of the board’s decision. We were going through a process, of which Mr. McKillen and the Barclay brothers’ representatives were aware, which culminated in a submission to the board and its approval of the maintenance of a process of consensual restructuring of Mr. McKillen’s loans rather than the sale of a portion of these to the Barclay brothers. When we came out of those meetings, my colleague Mr. Richard Woodhouse was given the authority to contact the Barclay brothers to inform them of the decision. I attempted to call Mr. McKillen but, of course, could not get hold of him. He does not do e-mail so I sent him a text. It was as simple as that. The reminder to him, following it up, was simply that this was a board decision and that it was a bank-client relationship that should not be divulged, as we were aware at the time that he was in litigation with the Barclay brothers. It was inappropriate, we felt, that he went to the press with that. Of course, it ultimately came out during the discovery process in that litigation. That is all there was to it.”

Today’s report which suggests IBRC is holding out for more than NAMA accepted for shares in the group may reignite the controversy and suspicion of IBRC’s relationship with Paddy. And because IBRC is 100% owned by us, we all have an interest in what is going on. It should be said that we seem to just get the Barclays’ side of the story in today’s Irish Times, but the question stands –

“Why is IBRC demanding a premium to sell Paddy McKillen loans to the Barclay brothers?”

@JP and NWL many thanks looking forward to that,in other TV news hulu has picked up the US rights to Love and Hate…well done RTE lots of interest in the US to watch that.
NWL many thanks for the link to the Committee,i have it as a PDF the whole exchange but cant ‘link’ it,gets scrambled well worth a read-i know you have!

@John, off topic but it’s a bugbear because it’s so awful but the rights sold in the US to hulu.com are apparently on-demand online and RTE is not saying if there was any upfront fee which suggests to me there wasn’t and RTE will only get income if someone actually views the series which is dreadful – if they stuck “Fair City” on after the news and called it “Fair F*cking City (ye c*nt)” it would get the same ratings. In Australia, which is the only other market of note to which it’s been sold. it broadcasts on W(orld cinema) cable channel, kinda like TV3with an even smaller e. You haven’t missed much.

On the European Commission, this is the second one where there is consultation, the first was to get the documents for the NAMA deferred payment initiative (deferred mortgage) and it now looks as if that one needs to go to the EU’s ombudsman, the folks at Ask EU are monitoring it.

@NWL, looking forward to watching it …the RTE player is a nightmare in US,TG4 is brilliant in comparison,speaking of RTE,they running something on repo law change-Love Hate indeed !
They pushed your request back till mid January…so much for transparency and openness. Good luck with this and great post on paddy and his bankers.

“It should be said that we seem to just get the Barclays’ side of the story in today’s Irish Times, but the question stands –

“Why is IBRC demanding a premium to sell Paddy McKillen loans to the Barclay brothers?””

@NWL this story is clearly spin from the Barclays that the Irish Times has unfortunately fallen for. My information is that this is old news and there was no new offer from the Barclays since IBRC declined their offer several months ago. Shame on the Irish Times on the quality of the journalism if this is correct. If Paddy’s loans are fully performing and IBRC has agreed a plan with him to refinance and repay his loans then why would they be seeking a premium to sell his loans to the Barclays? The Barclays are not a bank. They want to damage Paddy’s finances so they can take-over the hotels. It would not be a good move to sell out to them and risk damage his finances and his ability to repay the rest of his loans. I was proud to see the Irish flag flying over Claridges in the BBC documentary. Let’s hope it stays there.

@Sam, yes the IT story has the hallmarks of something pushed by the Barclays, it doesn’t help Paddy and increases the political pressure for IBRC to sell the loans.

To be clear on something though, the “premium” that IBRC is seeking for selling Paddy’s loans is not a premium on the book value of €300m, it is a premium on what NAMA implicitly deemed similar loans to be worth when they sold Derek Quinlan’s loans. So the NAMA sale price was implicitly about 50c in the euro, and the question asked above is why IBRC is apparently seeking more than that.

@NWL I don’t know the answer to your question but would guess that if Paddy is paying all of his interest and is repaying the loans 100% in the Euro. If he has agreed a timetable to refinance the loans away from Ireland so that IBRC gets every cent back – then why would IBRC sell his loans to the Barclays? Looks like the Barclays attempts cannot compete with the ‘premium’ Paddy already has agreed with IBRC.

McKillen is not Quinlan and it would be very foolish to compare the two. Which makes me wonder why is the focus on McKillen and never on Quinlan?

Of course, we don’t have evidence that the Barclays threatened to make communications public but we seem to have information being published which is helpful to the Barclays and which could be interpreted to mean pressure is being applied to IBRC.

@camella – it is a real mystery and very difficult to understand. Must be very strong loyalty because Quinlan is still leading the same extravagant lifestyle, which he admitted in court is funded by the Barclays, and NAMA is allowing this. Will be interesting to see if NAMA allows him to borrow the further €60m+ he must pay within days to avoid his shareholding being diluted in Maybourne Hotels? I wonder how NAMA will justify that when he owes them hundreds of millions in debt.

@NWL can someone please tell me why NAMA have not closed in on Derek Quinlan? I do not understand why they have forced every other developer into bankruptcy but continue to protect Quinlan. Has there been a deal done between NAMA and Quinlan on the side? I’m dying to find out. Quinlan owes tax payers more than any other developer yet NAMA continue to support him and his lavish lifestyle in London. Could this be directly associated to a deal NAMA may have with the Barclay brothers on the side? Any info/insight on this?

Ireland hasn’t lost its “Alice in Wonderland” looking glass appeal. Spurious nonsense being pushed out by Rory Godson, Barclays PR man through his mouthpiece Mark Hennessy, “business reporter” in the Irish Times. Why would IBRC sell a fully performing loan asset at a discount? To give support to the Tony Blair appointed “Knights of the Realm” over the Irish taxpayer? Now that would be a scandal!

Rumour on Wall Street is that Paddy has all his money organised to see off this invasion from the perfidious Brits.

P.S. Having a great time in the States. First deal offered was to develop the Playboy Club on South Beach in Miami. Only in the USA…. Welcome to America. Home at last!

Hi John, Such a difference from Ireland! From the positive national psyche, the “can do” attitude to the improving market and the banks open for business. It’s a different world to the negativity, begrudgery and vindictiveness of Ireland. I wish we had left years ago….. Life is full of missed opportunities.

For instance, in North Carolina we are negotiating with the city to build on their lands in return for which they receive a percentage of the completed homes. All the foreclosures and empty apartments in the have been bought up and those in negative equity have been helped re-purchase their homes at the new price levels. Insolvent banks are allowed to go bust and the deposit base is bought by the survivors.

It is a completely different outlook on problem solving than exists in Ireland where the policy is to keep the zombies alive. It’s appropriate that Bram Stoker who wrote Dracula was born in Ireland. What is really ironic that he spent some time as a civil servant in Dublin! Deja vu? …..Must be in the genes.

@NWL I recollect a recent Sunday Independent article of Quinlan swooning around the most expensive restaurants in London. Wasn’t it recently disclosed in the court case in London that Quinlan received millions of payments in sterling to Swiss bank accounts? Also isn’t he raising tens of millions at the moment to buy shares in the Savoy group hotels? Name another developer who has gotten away with this atrocious activity. I hear there are hundreds of people in the medical and legal profession that have gone bust because of Quinlan’s activity. What other developer has gotten away with this? Why have those millions of side payments to Swiss bank accounts not gone to pay off the Irish tax payer? NAMA know all about this from the London court case yet they do nothing.

@WSTT don’t forget it’s “happy holidays” over here,welcome and I wish you lots of success.Ireland is a poorer place in many ways with all this immigration.
There appears to be a groundswell of opinion to close or merge “Anglo” shock horror maybe into NAMA…..now now,contain yourself.
Had lots good times in the Carolina’s all best with your endeavors,we still have something beside the BMW plant in South Carolina.
I think “Anglo’s” time is up,the ahem “payment” of 3.1 billion on the PN note is focusing minds,often amazes me what captures the “public’s” attention.
Diarmuid O’Flynn has been courageously marching for what seems like years now,hardly a mention.http://thechatteringmagpie14.blogspot.com/

@JG, I like it around the Research triangle of NC and Duke University. The place is buzzing with creativity. Ireland is the graveyard shift. Paying the Anglo IOUs will kill what is left of the economy. Just close the deadbeat corrupt place down, liquidate it and move on.. I just don’t get why they will not do it.